Unassociated Document


    Exhibit
10.1

    ENERGY
XXI SERVICES, LLC


     

    AMENDED
AND RESTATED


     

    2006
LONG-TERM INCENTIVE PLAN

     

    Effective
Date:  December 11, 2009


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    


    ENERGY
XXI SERVICES, LLC


     

    AMENDED
AND RESTATED

    2006
LONG-TERM INCENTIVE PLAN

     

    Table
of Contents

     

    
      
        
          
            
              
                
                  
                    	
                            ARTICLE
      I

                          	
                            Introduction

                          	
                            1

                          
	 
      	 
      	 
      	 
      
	 
      	
                            1.1

                          	
                            Purpose

                          	
                            1

                          
	 
      	
                            1.2

                          	
                            Shares
      Subject to the Plan.

                          	
                            1

                          
	 
      	
                            1.3

                          	
                            Administration
      of the Plan.

                          	
                            2

                          
	 
      	
                            1.4

                          	
                            Amendment
      and Discontinuance of the Plan

                          	
                            2

                          
	 
      	
                            1.5

                          	
                            Granting
      of Awards to Participants

                          	
                            3

                          
	 
      	
                            1.6

                          	
                            Term
      of Plan

                          	
                            3

                          
	 
      	
                            1.7

                          	
                            Leave
      of Absence

                          	
                            3

                          
	 
      	
                            1.8

                          	
                            Definitions

                          	
                            3

                          
	 
      	 
      	 
      	 
      
	
                            ARTICLE
      II 

                          	
                            Non-Qualified
      Options

                          	
                            8

                          
	 
      	 
      	 
      	 
      
	 
      	
                            2.1

                          	
                            Grants

                          	
                            8

                          
	 
      	
                            2.2

                          	
                            Calculation
      of Exercise Price

                          	
                            8

                          
	 
      	
                            2.3

                          	
                            Terms
      and Conditions of Options

                          	
                            8

                          
	 
      	 
      
	
                            ARTICLE
      III  

                          	
                            Incentive
      Options

                          	
                            9

                          
	 
      	 
      	 
      	 
      
	 
      	
                            3.1

                          	
                            Eligibility

                          	
                            9

                          
	 
      	
                            3.2

                          	
                            Exercise
      Price

                          	
                            10

                          
	 
      	
                            3.3

                          	
                            Dollar
      Limitation

                          	
                            10

                          
	 
      	
                            3.4

                          	
                            10%
      Shareholder

                          	
                            10

                          
	 
      	
                            3.5

                          	
                            Options
      Not Transferable

                          	
                            10

                          
	 
      	
                            3.6

                          	
                            Compliance
      with 422

                          	
                            10

                          
	 
      	
                            3.7

                          	
                            Limitations
      on Exercise

                          	
                            10

                          
	 
      	 
      
	
                            ARTICLE
      IV  

                          	
                            Stock
      Appreciation Rights

                          	
                            10

                          
	 
      	 
      	 
      	 
      
	 
      	
                            4.1

                          	
                            Grants

                          	
                            10

                          
	 
      	
                            4.2

                          	
                            Right
      to Payment

                          	
                            11

                          
	 
      	
                            4.3

                          	
                            Rights
      Related to Options

                          	
                            11

                          
	 
      	
                            4.4

                          	
                            Right
      Without Option

                          	
                            11

                          
	 
      	
                            4.5

                          	
                            Terms

                          	
                            11

                          
	 
      	 
      
	
                            ARTICLE
      V 

                          	
                            Restricted
      Stock Unit Awards

                          	
                            11

                          
	 
      	 
      	 
      	 
      
	 
      	
                            5.1

                          	
                            Grants

                          	
                            11

                          
	 
      	
                            5.2

                          	
                            Award
      and Restrictions

                          	
                            11

                          
	 
      	
                            5.3

                          	
                            Forfeiture

                          	
                            11

                          


                  

                

              

            

          

        

      

    

     

    
      
         


      

      
        -i-

        
          

        

      

      
         


      

    

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	
                                            ARTICLE
      VI  

                                          	
                                            Restricted
      Stock

                                          	
                                            12

                                          
	 
      	 
      	 
      	 
      
	 
      	
                                            6.1

                                          	
                                            Grants

                                          	
                                            12

                                          
	 
      	
                                            6.2

                                          	
                                            Restricted
      Period and Vesting.

                                          	
                                            12

                                          
	 
      	
                                            6.3

                                          	
                                            Status
      as Stockholder

                                          	
                                            12

                                          
	 
      	 
      
	
                                            ARTICLE
      VII  

                                          	
                                            Performance
      Awards

                                          	
                                            13

                                          
	 
      	 
      	 
      	 
      
	 
      	
                                            7.1

                                          	
                                            Performance
      Awards

                                          	
                                            13

                                          
	 
      	
                                            7.2

                                          	
                                            Performance
      Goals

                                          	
                                            13

                                          
	 
      	 
      
	
                                            ARTICLE
      VIII  

                                          	
                                            Other
      Stock Or Performance-Based Awards

                                          	
                                            15

                                          
	 
      	 
      	 
      	 
      
	 
      	
                                            8.1

                                          	
                                            Bonus
      Stock

                                          	
                                            15

                                          
	 
      	
                                            8.2

                                          	
                                            Dividend
      Equivalents

                                          	
                                            15

                                          
	 
      	
                                            8.3

                                          	
                                            Other
      Awards

                                          	
                                            15

                                          
	 
      	 
      
	
                                            ARTICLE
      IX  

                                          	
                                            Certain
      Provisions Applicable To All Awards

                                          	
                                            15

                                          
	 
      	 
      	 
      	 
      
	 
      	
                                            9.1

                                          	
                                            General

                                          	
                                            15

                                          
	 
      	
                                            9.2

                                          	
                                            Stand-Alone,
      Additional, Tandem and Substitute Awards

                                          	
                                            16

                                          
	 
      	
                                            9.3

                                          	
                                            Term
      of Awards

                                          	
                                            16

                                          
	 
      	
                                            9.4

                                          	
                                            Form
      and Timing of Payment under Awards; Deferrals

                                          	
                                            16

                                          
	 
      	
                                            9.5

                                          	
                                            Vested
      and Unvested Awards

                                          	
                                            17

                                          
	 
      	
                                            9.6

                                          	
                                            Exemptions
      from Section 16(b) Liability

                                          	
                                            17

                                          
	 
      	
                                            9.7

                                          	
                                            Shareholder
      Approval Required for Repricing

                                          	
                                            18

                                          
	 
      	 
      
	
                                            ARTICLE
      X  

                                          	
                                            Withholding
      For Taxes

                                          	
                                            18

                                          
	 
      	 
      	 
      
	
                                            ARTICLE
      XI

                                          	
                                            Adjustments;
      Change in Control

                                          	
                                            18

                                          
	 
      	 
      	 
      	 
      
	 
      	
                                            11.1

                                          	
                                            Subdivision
      or Consolidation of Shares

                                          	
                                            18

                                          
	 
      	
                                            11.2

                                          	
                                            Corporate
      Recapitalization

                                          	
                                            19

                                          
	 
      	
                                            11.3

                                          	
                                            Change
      in Control

                                          	
                                            20

                                          
	 
      	
                                            11.4

                                          	
                                            Impact
      of Corporate Events on Awards Generally

                                          	
                                            20

                                          
	 
      	 
      
	
                                            ARTICLE
      XII  

                                          	
                                            Miscellaneous

                                          	
                                            21

                                          
	 
      	 
      	 
      	 
      
	 
      	
                                            12.1

                                          	
                                            Transferability

                                          	
                                            21

                                          
	 
      	
                                            12.2

                                          	
                                            No
      Rights to Awards

                                          	
                                            21

                                          
	 
      	
                                            12.3

                                          	
                                            No
      Right to Employment

                                          	
                                            21

                                          
	 
      	
                                            12.4

                                          	
                                            Governing
      Law

                                          	
                                            21

                                          
	 
      	
                                            12.5

                                          	
                                            Severability

                                          	
                                            21

                                          
	 
      	
                                            12.6

                                          	
                                            Other
      Laws

                                          	
                                            21

                                          
	 
      	
                                            12.7

                                          	
                                            409A
      Compliance - No Guarantee of Tax Consequences

                                          	
                                            22

                                          
	 
      	
                                            12.8

                                          	
                                            Shareholder
      Agreements

                                          	
                                            22

                                          
	 
      	
                                            12.9

                                          	
                                            Fractional
      Shares

                                          	
                                            22

                                          
	 
      	
                                            12.10

                                          	
                                            Conditions
      to Delivery of Stock

                                          	
                                            22

                                          


                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    


    
      
         


      

      
        -ii-

        
          

        

      

      
         


      

    


    ENERGY
XXI SERVICES, LLC

    Amended
and Restated

    2006
Long-term Incentive Plan

    Effective
Date: December 11, 2009

     

    ARTICLE I

    INTRODUCTION

     

    1.1         
Purpose.  The Energy XXI Services,
LLC 2006 Long-term Incentive Plan (the “Plan”) is intended to promote the interests
of Energy XXI Services, LLC, a Delaware limited liability corporation (the
“Employer”), and its stockholders (the
“Stockholders”) by encouraging Employees, Service
Providers and Non-Employee Directors (as each is defined below) to acquire or
increase their equity interests in Energy XXI (Bermuda) Limited, a Bermuda
entity, and any successor entity (the “Company”), thereby giving them an added
incentive to work toward the continued growth and success of the Employer and
the Company. The Board of Directors of the Company (the “Board”) also contemplates that through the
Plan, the Company, the Employer and its Affiliates will be better able to
compete for the services of the individuals needed for the continued growth and
success of the Company.

     

    1.2         
Shares
Subject to the Plan.

     

    (a)           Overall Number of
Shares Available for Delivery. Subject to adjustment in a manner
consistent with any adjustment made pursuant to Article XI, the aggregate number
of shares of Common Stock of the Company (“Common
Stock”) that may be issued
under the Plan, since its inception, shall not exceed nineteen million
(19,000,000) shares.

     

    (b)           Per Person Award
Limitations.  In each calendar year, during any part
of which the Plan is in effect, a Participant may not be granted (i) Awards
(other than Awards designated to be paid only in cash or the settlement of which
is not based on a number of shares of Common Stock) relating to more than
5,000,000 shares of Common Stock, subject to
adjustment in a manner consistent with any adjustment made pursuant to Article
XI, and (ii) Awards designated to be paid only in cash, or the settlement of
which is not based on a number of shares of Common Stock, having a value
determined on the date of grant in excess of $3,000,000.

     

    (c)           Reuse of
Shares. To the extent any Award under this Plan
shall be forfeited, expire or be canceled, in whole or in part, then the number
of shares of Common Stock covered by the Award so forfeited, expired or canceled
may again be awarded pursuant to the provisions of this Plan.  Awards
that may be satisfied either by the issuance of shares of Common Stock or by
cash or other consideration shall be counted against the maximum number of
shares of Common Stock that may be issued under the Plan only during the period
that the Award is outstanding and to the extent the Award is ultimately
satisfied by the issuance of shares of Common Stock.  Awards will not
reduce the number of shares of Common Stock that may be issued pursuant to this
Plan if the settlement of the Award will not require the issuance of shares of
Common Stock, as, for example, a Stock Appreciation Right that can be satisfied
only by the payment of cash.  Common Stock that is tendered to
purchase shares of Common Stock upon the exercise of any award or to satisfy tax
withholding obligations will not be available for future Awards under the
Plan.


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

     

    (d)           Stock
Offered.  Shares issued pursuant to the Plan (i)
may be treasury shares, authorized but unissued shares or, if applicable, shares
acquired in the open market and (ii) shall be fully paid and
nonassessable.

     

    1.3         
Administration of the
Plan.


     

    (a)           Authority of the
Committee.  The Plan shall be administered by the
Committee.  Subject to the provisions of the Plan, the Committee shall
interpret the Plan and all Awards under the Plan, shall make such rules as it
deems necessary for the proper administration of the Plan, shall make all other
determinations necessary or advisable for the administration of the Plan and
shall correct any defect or supply any omission or reconcile any inconsistency
in the Plan or in any Award under the Plan in the manner and to the extent that
the Committee deems desirable to effectuate the Plan.  Any action
taken or determination made by the Committee pursuant to this and the other
paragraphs of the Plan shall be conclusive on all parties.  The act or
determination of a majority of the Committee shall be deemed to be the act or
determination of the Committee.  The Committee may delegate to
officers or managers of the Company or the Employer or any of its Affiliates, or
committees thereof, the authority, subject to such terms as the Committee shall
determine, to the extent that such delegation will not result in the loss of an
exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject to
Section 16 of the 1934 Act in respect of the Company and will not cause Awards
intended to qualify as “performance-based compensation” under Section 162(m) of
the Code to fail to so qualify.  The Committee may appoint agents to
assist it in administering the Plan.

     

    (b)           Limitation of
Liability.  The
Committee and each member thereof shall be entitled to, in good faith, rely or
act upon any report or other information furnished to him or her by any officer
or employee of the Company, the Employer or any of its Affiliates, the
Employer’s or the Company’s legal counsel, independent auditors, consultants or
any other agents assisting in the administration of the Plan.  Members
of the Committee and any officer or employee of the Employer or any of its
Affiliates acting at the direction or on behalf of the Committee shall not be
personally liable for any action or determination taken or made in good faith
with respect to this Plan, and shall, to the fullest extent permitted by law, be
indemnified and held harmless by the Company with respect to any such action or
determination.

     

    1.4         
Amendment and
Discontinuance of the Plan and
Awards.  The
Board may amend, suspend or terminate the Plan; provided, however, that, without
the consent of the holder of an Award, no amendment, suspension or termination
of the Plan may terminate such Award or adversely affect such holder’s rights
with respect to such Award in any material respect; provided further, however,
that any amendment which would constitute a “material revision” of the Plan (as
that term is used in the rules of any exchange on which the Common Stock is
traded) shall be subject to approval by the Company’s
shareholders.  The Committee may, without the consent of the holder of
an Award, amend, modify or terminate the Award and the agreement evidencing such
Award; provided, however, such amendment, modification or termination shall not,
without such Person’s consent, reduce or diminish the value of such Award
determined as if the Award had been exercised, vested, cashed in or otherwise
settled on the date of such amendment or termination, or cause such Award to be
subject to adverse tax consequences under the Non-Qualified Deferred
Compensation Rules.


    
      
         


      

      
        -2-

        
          

        

      

      
         


      

    

     

    1.5         
Granting
of Awards to Participants.  The Committee shall have
the authority to grant, prior to the expiration date of the Plan, Awards to such
Employees, Service Providers and Non-Employee Directors as may be selected by it
on the terms and conditions hereinafter set forth in the Plan.  In
selecting the Persons to receive Awards, including the type
and size of the Award, the Committee may consider any factors that it may deem
relevant.  Notwithstanding the foregoing, any Awards made to members
of the Committee or any Service Provider to the Committee or the Board, must be
approved by the full Committee.

     

    1.6         
Term of
Plan.  The Plan
has been adopted by the board of directors of the Employer and the
Company.  The Plan, as amended and restated, is effective as of
December 11,
2009 (the “Effective
Date”), subject to approval
by the shareholders of the Company.  The provisions of the Plan are
applicable to all Awards granted on or after the Effective Date.  If
not sooner terminated under the provisions of Section 1.4 hereof, the Plan shall
terminate upon, and no further Awards shall be made, after the tenth
(10th) anniversary of the Effective
Date.

     

    1.7         
Leave of
Absence.  If an
Employee is on military, sick leave or other bona fide leave of absence, such
individual shall be considered an “Employee” for purposes of an outstanding
Award during the period of such leave provided it does not exceed ninety (90)
days, or, if longer, so long as the individual’s right to reemployment is
guaranteed either by statute or by contract.  If the period of leave
exceeds ninety (90) days, such Employee’s Employment (as defined below) shall be
deemed to have terminated on the ninety-first (91st) day of such leave, unless the
individual’s right to reemployment is guaranteed by statute or
contract.

     

    1.8         
Definitions.  As used in the Plan, the
following terms shall have the meanings set forth below:

     

    (a)           “1934 Act” means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder by the
Securities and Exchange Commission.

     

    (b)           “Affiliate” means (i) any entity in which the
Employer directly or indirectly, owns fifty percent (50%) or more of the
combined voting power, as determined by the Committee, (ii) any “parent
corporation” of the Employer (as defined in Section 424(e) of the Code), (iii)
any “subsidiary corporation” of any such parent corporation (as defined in
Section 424(f) of the Code) of the Employer and (iv) any trades or businesses,
whether or not incorporated which are members of a controlled group or are under
common control (as defined in Sections 414(b) or (c) of the Code) with the
Employer, but using the threshold of 50% ownership wherever 80%
appears.

     

    (c)           “Awards”
means, collectively, Options, Stock Appreciation Rights, Restricted Stock Unit
Awards, Restricted Stock, Performance Awards, Bonus Stock, Dividend Equivalents
or Other Stock or Performance Based Awards.

     

    (d)           “Board”
has the meaning set forth in Section 1.1
hereof.

     

    (e)           “Bonus
Stock”
has the meaning set forth in Section 8.1
hereof.


    
      
         


      

      
        -3-

        
          

        

      

      
         


      

    

     

    (f)           “Cause” for termination of any Participant who
is a party to an agreement of Employment with or who provides services to the
Employer or the Company shall mean termination for “Cause” as such term is
defined in such agreement, the relevant portions of which are incorporated
herein by reference.  If such agreement does not define “Cause” or if
a Participant is not a party to such an agreement, “Cause” means (i) the
commission by a Participant of a criminal or other act that causes or is likely
to cause substantial economic damage to the Company, the Employer or an
Affiliate or substantial injury to the business reputation of the Company, the
Employer or an Affiliate; (ii) the commission by a Participant of an act of
fraud in the performance of such Participant’s duties on behalf of the Company,
the Employer or an Affiliate; or (iii) the failure of a Participant to perform
the duties of such Participant to the Company, the Employer or an Affiliate
(other than such failure resulting from the Participant’s incapacity due to
physical or mental illness).

     

    (g)           “Change of
Control” shall be deemed to
have occurred upon any of the following events:

     

    (i)           any “person” (as defined in Section
3(a)(9) of the 1934 Act, and as modified by Section 13(d) and 14(d) thereof)
other than (A) the Company or any of its subsidiaries, (B) any employee benefit
plan of the Company or any of its subsidiaries, (C) an Affiliate, (D) a company
owned, directly or indirectly, by shareholders of the Company in substantially
the same proportions as their ownership of the Company, or (E) an underwriter
temporarily holding securities pursuant to an offering of such securities,
becomes the “beneficial owner” (as defined in Rule 13d-3 of the 1934 Act),
directly or indirectly, of securities of the Company representing fifty percent
(50%) or more of the shares of voting stock of the Company then outstanding;
provided, however, that an initial public offering of Common Stock shall not
constitute a Change of Control;

     

    (ii)           the consummation of any merger,
reorganization, business combination or consolidation of the Company or one of
its subsidiaries with or into any other company, other than a merger,
reorganization, business combination or consolidation which would result in the
holders of the voting securities of the Company outstanding immediately prior
thereto holding securities which represent immediately after such merger,
reorganization, business combination or consolidation more than fifty percent
(50%) of the combined voting power of the voting securities of the Company or
the surviving company or the parent of such surviving
company;

     

    (iii)           the consummation of a sale or
disposition by the Company of the Employer or all or substantially all of the
Company’s assets, other than a sale or disposition where the holders of the
voting securities of the Company outstanding immediately prior thereto hold
securities immediately thereafter which represent more than fifty percent (50%)
of the combined voting power of the voting securities of the acquiror, or parent
of the acquiror, of such assets, or  the shareholders of the Company
approve a plan of complete liquidation or dissolution of the Company;
or


    
      
         


      

      
        -4-

        
          

        

      

      
         


      

    


    (iv)           individuals who, as of the Effective
Date, constitute the Board (the “Incumbent
Board”) cease for any
reason to constitute at least a majority of the Board; provided, however, that
any individual becoming a Director subsequent to the Effective Date whose
election to the Board was approved by a vote of at least a majority of the
Directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an election contest with respect to the election or removal of
Directors or other solicitation of proxies or consents by or on behalf of a
Person other than the Board.

     

    Solely
with respect to any Award that is subject to Section 409A of the Code and that
is payable upon a Change of Control, and to the extent that the above definition
does not comply with the Non-Qualified Deferred Compensation Rules, such
definition shall be modified, to the extent required to ensure that this
definition complies with the requirements of Section 409A of the Code, as set
forth in the Non-Qualified Deferred Compensation Rules, and the Plan shall be
operated in accordance with the above definition of Change of Control as
modified to the extent necessary to ensure that the above definition complies
with the definition prescribed in the Non-Qualified Deferred Compensation Rules
insofar as the definition relates to any Award that is subject to Section 409A
of the Code and payable upon a Change of Control.

     

    (h)           “Code” means the Internal Revenue Code of
1986, as amended from time to time, and the rules and regulations
thereunder.

     

    (i)           “Committee” means the committee appointed by the
Board or, if none, the Board; provided however, that with respect to any Award
granted to a Covered Employee which is intended to be “performance-based
compensation” as described in Section 162(m)(4)(c) of the Code, to the extent
such Award is subject to Section 162(m) of the Code, the Committee shall consist
solely of two or more “outside directors” as described in Section
162(m)(4)(c)(i) of the Code; and if the Company is subject to the 1934 Act, the
Committee shall mean the
compensation committee of the Board, which shall consist of not less than two
(2) independent members of the Board, each of whom shall qualify as a
“non-employee director” (as that term is defined in Rule 16b-3 of the General
Rules and Regulations under the 1934 Act) appointed by and serving at the
pleasure of the Board to administer this Plan or, if none, the independent
members of the Board.

     

    (j)           “Common
Stock” has the meaning set
forth in Section 1.2(a) hereof.

     

    (k)           “Company” has the meaning set forth in Section
1.1 hereof.

     

    (l)           “Covered
Employee” means each of the
employees/officers of the Company as described in Section 162(m) of the Code and
applicable rules, regulations and guidance issued thereunder, as well as any
individual designated by the Committee, at the time of grant of an Award, who is
likely to be a Covered Employee.

     

    (m)           “Director” means a director of the
Company.

     

    (n)           “Disability” means a Participant is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months, or is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
of or a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three months under an
accident and health plan covering employees of the
Employer.


    
      
         


      

      
        -5-

        
          

        

      

      
         


      

    


    (o)           “Dividend
Equivalent” means a right,
granted to a Participant under Section 8.2, to receive cash, Common Stock or other
Awards or other property equal in value to dividends paid with respect to a
specified number of shares of Common Stock, or other periodic
payments.

     

    (p)           “Effective
Date” has the meaning set
forth in Section 1.6 hereof.

     

    (q)           “Employee” means any employee of the Employer or
an Affiliate.

     

    (r)           “Employer”
has the meaning set forth
in Section 1.1 hereof and includes any other Affiliate which is determined by
the Board to be an Employer.

     

    (s)           “Employment” includes any period in which a
Participant is an Employee or a paid Service Provider to the Employer or an
Affiliate.

     

    (t)           “Fair Market Value or
FMV Per Share” means the
closing price per share of the Common Stock on any national or foreign
securities exchange or over-the-counter market, if applicable, for the date of
the determination, or if no trade of the Common Stock shall have been reported
for such date, the closing sales price quoted on such exchange for the most
recent trade prior to the determination date.  If shares of the Common
Stock are not listed or admitted to trading on any exchange, over-the-counter
market or any similar organization as of the determination date, the FMV Per
Share shall be determined by the Committee in good faith using a fair
application of a reasonable valuation methodology taking into account all
available information material to the value of the Company including, without
limitation, the Non-Qualified Deferred Compensation Rules.

     

    (u)           “Good
Reason” for termination of
Employment by an Employee, or for termination of service by a Service Provider,
if such Employee or Service
Provider is a party to an agreement for Employment with or services to the
Employer or the Company, which agreement includes a definition of “Good Reason”
(or similar term or concept) for termination of Employment with or services to
the Employer or the Company, shall have the same definition for purposes of the
Plan as is set forth in such agreement, the relevant portions of which are
incorporated herein by reference.  If such Employee or Service
Provider is not a party to an agreement with the Employer or the Company that
defines the term “Good Reason,” (or similar term or concept) such term shall not
be applicable to such Employee or Service Provider and any provision of the Plan
or an Award referencing “Good Reason” shall not be applicable to such Employee
or Service Provider.

     

    (v)         
  “Grants” has the meaning set forth in Section
11.3 hereof.

     

    (w)           “Incentive
Option” means any option
which satisfies the requirements of Section 422 of the Code and is granted
pursuant to Article III of the Plan.

     

    (x)       
    “Incumbent
Board” has the meaning set
forth in Section 1.8(g) in the definition of “Change of
Control.”


    
      
         


      

      
        -6-

        
          

        

      

      
         


      

    


    (y)     
      “Non-Employee
Director” means an
individual who is a member of the Board but who is neither an Employee nor a
Service Provider of the Company or any Affiliate.

     

    (z)       
     “Non-Qualified
Deferred Compensation Rules” means the limitations or requirements of
Section 409A of the Code and the regulations and other guidance promulgated
thereunder.

     

    (aa)           “Non-Qualified
Option” shall mean an
option not intended to satisfy the requirements of Section 422 of the Code and
which is granted pursuant to Article II of the Plan.

     

    (bb)          “Option” means an option to acquire Common
Stock granted pursuant to the provisions of the Plan, and refers to either an
Incentive Option or a Non-Qualified Option, or both, as
applicable.

     

    (cc)           “Option Expiration
Date” means the date
determined by Committee which shall not be more than ten (10) years after the
date of grant of an Option.

     

    (dd)           “Option Grant
Date” means the date on
which the Committee grants an Option pursuant to the provisions of the
Plan.

     

    (ee)          “Optionee” means a Participant who has received or
will receive an Option.

     

    (ff)           
“Other Stock or
Performance-Based Award”
means an award granted pursuant to Section 8.3 of the Plan.

     

    (gg)          “Participant” means any Non-Employee Director, Employee
or Service Provider granted an Award under the Plan.

     

    (hh)          “Performance
Award” means an Award
granted pursuant to Article VII of the Plan, which, if earned, shall be payable
in shares of Common Stock, cash or any combination thereof as determined by the
Committee.

     

    (ii)           “Performance
Period” means the period, not to exceed five years,
over which achievement of the applicable performance goal(s) in respect of a
Performance Award shall be measured.

     

    (jj)           “Person” means any person or entity of any
nature whatsoever, specifically including an individual, a firm, a company, a
corporation, a partnership, a limited liability company, a trust or other
entity; a Person, together with that Person’s “affiliates” and “associates” (as
those terms are defined in Rule 12b-2 under the 1934 Act, provided that
“registrant” as used in Rule 12b-2 shall mean the Company), and any Person
acting as a partnership, limited partnership, joint venture, association,
syndicate or other group (whether or not formally organized), or otherwise
acting jointly or in concert or in a coordinated or consciously parallel manner
(whether or not pursuant to any express agreement), or the purpose of acquiring,
holding, voting or disposing of securities of the Company with such Person,
shall be deemed a single “Person.”


    
      
         


      

      
        -7-

        
          

        

      

      
         


      

    


    (kk)          “Restricted
Period” means the period
established by the Committee with respect to an Award during which the Award
either remains subject to forfeiture or is not exercisable by the
Participant.

     

    (ll)      
     “Restricted
Stock” means any share of
Common Stock, prior to the lapse of restrictions thereon, granted under Article
VI of the Plan.

     

    (mm)        “Restricted Stock
Unit
Awards” has the meaning set forth in
Section 5.1 hereof.

     

    (nn)          “Service
Provider” means any
individual or entity, other than a Director or an Employee, who renders
consulting or advisory services to the Company, the Employer or an
Affiliate.

     

    (oo)     
    “Stock Appreciation
Rights” means an Award
described in, and granted pursuant to, Article IV of the
Plan.

     

    (pp)          “Stockholder” has the meaning set forth in Section
1.1 hereof.

     

    ARTICLE II

    NON-QUALIFIED
OPTIONS

     

    2.1         
Grants.  The Committee may grant
Options to purchase Common Stock to any Employee, Service Provider or
Non-Employee Director.  In the event the Company does not constitute
an “eligible issuer of service recipient stock” (within the meaning of the
Non-Qualified Deferred Compensation Rules) with respect to any Option granted
hereunder, such Option shall be designed to comply with the Non-Qualified
Deferred Compensation Rules, including the permissible payment provisions
thereof.

     

    2.2         
Calculation of
Exercise Price.  The exercise price to be
paid for each share of Common Stock deliverable upon exercise of each Option
granted under this Article II shall not be less than the FMV Per Share on the
Option Grant Date.  The exercise price for each Option granted under
this Article II shall be subject to adjustment as provided in Article XI
below.

     

    2.3         
Terms
and Conditions of Options.  Options shall be in such
form as the Committee may from time to time approve, shall be subject to the
following terms and conditions and may contain such additional terms and
conditions, not inconsistent with this Article II, as the Committee shall deem
desirable:

     

    (a)           Option Period and
Conditions and Limitations on Exercise.  No Option shall be
exercisable later than the Option Expiration Date.  To the extent not
prohibited by other provisions of the Plan, each Option shall be exercisable at
such time or times as the Committee in its discretion may determine at the
Option Grant Date.  The Committee may at any time or from
time to time, in its discretion, in the case of any Option which is not then
immediately exercisable in full, accelerate the time or times at which such
Option may be exercised to any earlier time or times.


    
      
         


      

      
        -8-

        
          

        

      

      
         


      

    


    (b)           Manner of
Exercise.  During
the lifetime of the Participant to whom any Option is granted, such Option shall
be exercisable only by the Participant (or his guardian).  In order to
exercise an Option, the Person or Persons entitled to exercise it shall deliver
to the Company payment in full for the shares being purchased, together with any
required withholding taxes.  The payment of the exercise price,
together with any required withholding taxes, for each Option shall be made (i)
in cash or by check payable and acceptable to the Company; (ii) with the consent
of the Committee, by tendering to the Company shares of Common Stock owned by
the Person for more than six months having an aggregate Fair Market Value as of
the date of exercise that is not greater than the full exercise price for the
shares with respect to which the Option is being exercised and by paying any
remaining amount of the exercise price as provided in (i) above; (iii) subject
to such instructions as the Committee may specify, at the Person’s written
request the Company may deliver certificates for the shares of Common Stock for
which the Option is being exercised to a broker for sale on behalf of the
Person, provided that the Person has irrevocably instructed such broker to remit
directly to the Company on the Person’s behalf the full amount of the exercise
price from the proceeds of such sale; or (iv) with the consent of the Committee,
by net issue exercise, pursuant to which the Company will issue to the Person a
number of shares of Common Stock as to which the Option is exercised, less a
number of shares with a Fair Market Value as of the date of exercise equal to
the exercise price.  In the event that the Person elects to make
payment as allowed under clause (ii) above, the Committee may, upon confirming
that the Optionee owns the number of additional shares being tendered, authorize
the issuance of a new certificate for the number of shares being acquired
pursuant to the exercise of the Option less the number of shares being tendered
upon the exercise and return to the Person (or not require surrender of) the
certificate for the shares being tendered upon the exercise.  If the
Committee so requires, such Person or Persons shall also deliver a written
representation that all shares being purchased are being acquired for investment
and not with a view to, or for resale in connection with, any distribution of
such shares.

     

    (c)           No Rights as a
Shareholder.  The Person or Persons entitled to
exercise, or who have exercised, an Option shall not be entitled to any rights
as a shareholder of the Company with respect to any shares subject to such
Option until he shall have become the holder of record of such
shares.

     

    ARTICLE III

    INCENTIVE OPTIONS

     

    The terms
specified below shall be applicable to all Incentive Options.  Except
as modified by the provisions of this Article III, all the provisions of Article
II hereof shall also be applicable to Incentive
Options.  Non-Qualified Options shall not
be subject to the terms of this Article III.

     

    3.1         
Eligibility.  Incentive Options may be
granted only to Employees of (a) the Employer or the Company, (b)
any “parent corporation” of
the Company (as defined in section 424(e) of the Code) or (c) any “subsidiary corporation” of
the Company (as defined in section 424(f) of the
Code).  Incentive
Options may be granted only if the Plan is approved by the Company’s
shareholders within one year prior to or after the
Effective Date.


    
      
         


      

      
        -9-

        
          

        

      

      
         


      

    


    3.2         
Exercise
Price.  The
exercise price per share of Common Stock subject to an Incentive Option shall
not be less than one hundred percent (100%) of the FMV Per Share on the Option
Grant Date (subject to adjustment as provided in Article XI
below).

     

    3.3         
Dollar
Limitation.  The
aggregate Fair Market Value (determined as of the respective Option Grant
Date(s)) of shares of Common Stock for which one or more Options granted to any
Employee under the Plan (or any other option plan of the Employer, the Company
or an Affiliate) may for the first time become exercisable as Incentive Options
during any one (1) calendar year shall not exceed the sum of One Hundred
Thousand Dollars ($100,000).  To the extent the Employee holds two (2)
or more such Options which become exercisable for the first time in the same
calendar year, the foregoing limitation on the exercisability of such Options as
Incentive Options shall be applied on the basis of the order in which such
Options are granted.

     

    3.4         
10%
Shareholder.  If
any Employee to whom an Incentive Option is granted is a 10% shareholder of the
Company, the Employer or any Affiliate, then the exercise price per share shall
not be less than one hundred ten percent (110%) of the FMV Per Share on the
Option Grant Date and the option term shall not exceed five (5) years measured
from the Option Grant Date.

     

    3.5         
Options
Not Transferable.  Notwithstanding any other
provision of this Plan to the contrary, no Incentive Option granted hereunder
shall be transferable other than by will or by the laws of descent and
distribution and shall be exercisable during the Optionee’s lifetime only by
such Optionee.

     

    3.6         
Compliance with
422.  All Options
that are intended to be Incentive Options shall be designated as such in the
Option grant and in all respects shall be issued in compliance with Code Section
422.  No more than nineteen million (19,000,000) Incentive Options may
be issued under the terms of the Plan (subject to adjustment as provided in
Article XI below).

     

    3.7         
Limitations on
Exercise.  No
Incentive Option shall be exercisable more than three (3) months after the
Optionee ceases to be an Employee for any reason other than death or disability
(within the meaning of section 22(e)(3) of the Code), or more than one (1) year
after the Optionee ceases to be an Employee due to death or disability (within
the meaning of section 22(e)(3) of the Code).

     

    ARTICLE IV

    STOCK APPRECIATION
RIGHTS

     

    4.1         
Grants.  The Committee is authorized
to grant Stock Appreciation Rights to Employees, Service Providers or
Non-Employee Directors on the terms and conditions set forth in
this Article IV.  In the event the Company does not constitute an
“eligible issuer of service recipient stock” (within the meaning of the
Non-Qualified Deferred Compensation Rules) with respect to any Stock
Appreciation Right granted hereunder, such Stock Appreciation Right shall be
designed to comply with the Non-Qualified Deferred Compensation Rules, including
the permissible payment provisions thereof.


    
      
         


      

      
        -10-

        
          

        

      

      
         


      

    


    4.2         
Right to
Payment.  A Stock
Appreciation Right shall confer on the Participant to whom it is granted a right
to receive, upon exercise thereof, the excess of (a) the FMV Per Share on the
date of exercise over (b) the FMV Per Share on the date of
grant.  Such excess may be paid in cash or shares of Common Stock as
determined by the Committee and set forth in the Award.  In no event
will the value assigned to the shares of Common Stock covered by a Stock
Appreciation Right on the date of grant be less than the FMV Per Share on the
date of grant of the Stock Appreciation Right (subject to adjustment as provided
in Article XI below).

     

    4.3         
Rights
Related to Options.  A Stock Appreciation Right
granted in connection with an Option shall entitle a Participant, upon exercise
thereof, to surrender that Option or any portion thereof, to the extent
unexercised, and to receive payment of an amount computed pursuant to Section
4.2 hereof.  That Option shall then cease to be exercisable to the
extent surrendered.  A Stock Appreciation Right granted in connection
with an Option shall be exercisable only at such time or times and only to the
extent that the related Option is exercisable and shall not be transferable
(other than by will or the laws of descent and distribution) except to the
extent that the related Option is transferable.

     

    4.4         
Right
Without Option.  A Stock Appreciation Right
granted independent of an Option shall be exercisable as determined by the
Committee and set forth in the Award agreement governing such Stock Appreciation
Right.

     

    4.5         
Terms.  The Committee shall
determine at the date of grant the time or times at which and the circumstances
under which a Stock Appreciation Right may be exercised in whole or in part
(including achievement of certain performance goals and/or meeting certain
future service requirements), the method of exercise, whether or not a Stock
Appreciation Right shall be in tandem or in combination with any other Award and
any other terms and conditions of any Stock Appreciation
Right.

     

    ARTICLE V

    RESTRICTED STOCK UNIT
AWARDS

     

    5.1         
Grants.  The Committee is authorized
to grant to Employees, Service Providers or Non-Employee Directors rights to
receive cash or Common Stock equal to the Fair Market Value of specified number
of shares of Common Stock at the end of a specified deferral period
(“Restricted Stock
Unit Awards”), on the terms
and conditions set forth in this Article V.

     

    5.2         
Award
and Restrictions.  Satisfaction of a Restricted
Stock Unit Award shall occur upon expiration of the deferral period specified
for such Restricted Stock Unit Award by the Committee.  In addition,
Restricted Stock Unit Awards shall be subject to such restrictions (which may
include a risk of forfeiture), if any, as the Committee may impose, which
restrictions may lapse at the expiration of the deferral period or at earlier
specified times (including based on achievement of performance goals and/or
future service requirements), separately or in combination, installments or
otherwise, as the Committee may determine.

     

    5.3         
Forfeiture.  Except as otherwise
determined by the Committee or as may be set forth in any Award, employment or
other agreement pertaining to a Restricted Stock Unit Award, upon termination of
Employment or services during the applicable deferral period or portion thereof
to which forfeiture conditions apply, all Restricted Stock Unit Awards that are
at that time subject to deferral (other than a deferral at the election of the
Participant) shall be forfeited; provided that the Committee may provide, by
rule or regulation or in any Award agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to Restricted Stock
Unit Awards shall be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee may in other cases waive in
whole or in part the forfeiture of Restricted Stock Unit
Awards.


    
      
         


      

      
        -11-

        
          

        

      

      
         


      

    

     

    
      ARTICLE VI

       

      RESTRICTED STOCK

       

      6.1         
Grants.  All Employees, Service
Providers and Non-Employee Directors shall be eligible for grants of Restricted
Stock.

       

      6.2         
Restricted Period and
Vesting.  A grant
of Restricted Stock is a grant of Common Stock which is subject to such
limitations (including, without limitation, limitations that qualify as a
“substantial risk of forfeiture” within the meaning given to that term under
Section 83 of the Code) and restrictions on transfer by the Participant and
repurchase by the Employer or the Company as the Committee, in its sole
discretion, shall determine.  Prior to the lapse of such restrictions,
the Participant shall not be permitted to transfer such
shares.

       

      6.3         
Repurchase.  The Employer or the Company shall have
the right to repurchase or recover such shares for the lesser of (a) the amount
of cash paid therefore, if any or (b) the Fair Market Value of the shares at the
time of repurchase, if (i) the Participant’s Employment from or services to the
Employer or an Affiliate is terminated by the Employer, such Affiliate or the
Participant prior to the lapse of such restrictions (unless otherwise provided
in the related Award agreement) or (ii) the Restricted Stock is forfeited by the
Participant pursuant to the terms of the Award.

       

      6.4         
Status
as Stockholder.  Each certificate representing Restricted
Stock awarded under the Plan shall be registered in the name of the Participant
and, during the Restricted Period, shall be left in deposit with the Company and
a stock power endorsed in blank. Unless otherwise provided in an Award
agreement, the grantee of Restricted Stock shall have all the rights of a
shareholder of the Company with respect to such shares including the right to
vote and the right to receive dividends or other distributions paid or made with
respect to such shares.  Any certificate or certificates representing
shares of Restricted Stock shall bear a legend similar to the
following:

       

      The
shares represented by this certificate have been issued pursuant to the terms of
the Energy XXI Services, LLC 2006 Long-term Incentive Plan (as amended and
restated) and Restricted Stock Grant Agreement dated ________, 20___ and may not
be sold, pledged, transferred, assigned or otherwise encumbered in any manner
except as is set forth in the terms of such Plan or grant.

       

      
        
          
          

        

        
          -12-

          
            

          

        

        
          
          

        

      

    

    ARTICLE
VII

    PERFORMANCE
AWARDS

     

    7.1           Performance
Awards.  To the extent the Committee determines that any Award
granted pursuant to this Plan shall be contingent upon performance goals or
shall constitute “performance-based compensation” for purposes of Section 162(m)
of the Code, the grant, vesting, exercise and/or settlement of the Award shall,
in the Committee’s discretion, be subject to the achievement of performance
goals determined and applied in a manner consistent with this Article
VII.  The Committee may grant Performance Awards based on performance
criteria measured over a Performance Period.  The Committee may use
such business criteria and other measures of performance as it may deem
appropriate in establishing any performance conditions, and may exercise its
discretion to increase the amounts payable under any Award subject to
performance conditions, except as limited under Section 7.2 hereof in the case
of a Performance Award granted to a Covered Employee.

     

    7.2           Performance
Goals.  The grant, vesting, exercise and/or settlement of a
Performance Award shall be contingent upon the terms set forth in this Section
7.2.

     

    (a)           General.  The
performance goals for Performance Awards shall consist of one or more business
criteria and a targeted level or levels of performance with respect to each such
criteria, as specified by the Committee.  In the case of any Award
granted to a Covered Employee, performance goals shall be designed to be
objective and shall otherwise meet the requirements of Section 162(m) of the
Code and regulations thereunder (including Treasury Regulations Section 1.162-27
and successor regulations thereto), including the requirement that the level or
levels of performance targeted by the Committee are such that the achievement of
performance goals is “substantially uncertain” at the time the Award is
granted.  The Committee may determine that such Performance Awards
shall be granted, become vested or exercisable, and/or be settled upon
achievement of any one performance goal or that two or more of the performance
goals must be achieved as a condition to the grant, vesting, exercise and/or
settlement of such Performance Awards.  Performance goals may differ
among Performance Awards granted to any one Participant or for Performance
Awards granted to different Participants.

     

    (b)           Business
Criteria.  One or more of the following business criteria for
the Company, an a consolidated basis, and/or for specified subsidiaries,
divisions or business or geographical units of the Company (except with respect
to the total stockholder return and earnings per share criteria), shall be used
by the Committee in establishing performance goals for Performance Awards
granted to a Participant:  (i) earnings per share; (ii) increase in
revenues; (iii) increase in cash flow; (iv) increase in cash flow return; (v)
increase in cash flow from operations; (vi) return on net assets; (vii) return
on assets; (viii) return on investment; (ix) return on capital; (x) return on
equity; (xi) economic value added; (xii) gross margin; (xiii) operating margin;
(xiv) contribution margin; (xv) net income; (xvi) net income per share; (xvii)
pretax earnings; (xviii) pretax earnings before interest, depreciation and
amortization; (xix) pretax operating earnings after interest expense and before
incentives, service fees, and extraordinary or special items; (xx) operating
income; (xxi) total stockholder return; (xxii) debt reduction; (xxiii) market
share; (xxiv) change in the Fair Market Value of the Common Stock (with or
without dividends); (xxv) reserve additions; (xxvi) reserve replacement ratio;
(xxvii) production volumes; (xxviii) finding and development costs; (xxix)
G&A expenses; and (xxx) any of the above goals determined on an absolute,
relative or BOE basis, as applicable, or as compared to the performance of a
published or special index deemed applicable by the Committee including, but not
limited to, the Standard & Poor’s 500 Stock Index or a group of comparable
companies.


    
      
         


      

      
        -13-

        
          

        

      

      
         


      

    

     

    (c)           Timing for Establishing Performance
Goals.  Performance goals in the case of any Award granted to a
Participant who is a Covered Employee shall be established not later than ninety
(90) days after the beginning of any Performance Period applicable to such
Performance Awards, or at such other date as may be required or permitted for
“performance-based compensation” under Section 162(m) of the Code.

     

    (d)           Performance Award
Pool.  The Committee may establish a Performance Award pool,
which shall be an unfunded pool, for purposes of measuring performance of the
Company in connection with Performance Awards.  The amount of such
Performance Award pool shall be based upon the achievement of a performance goal
or goals based on one or more of the criteria set forth in Section 7.2(b) hereof
during the given Performance Period, as specified by the Committee in accordance
with Section 7.2(c) hereof.  The Committee may specify the amount of
the Performance Award pool as a percentage of any of such criteria, a percentage
thereof in excess of a threshold amount, or as another amount which need not
bear a strictly mathematical relationship to such criteria.

     

    (e)           Settlement of Performance Awards;
Other Terms.  After the end of each Performance Period, the
Committee shall determine the amount, if any, of (i) the Performance Award pool
and the maximum amount of the potential Performance Award payable to each
Participant in the Performance Award pool, or (ii) the amount of the potential
Performance Awards otherwise payable to each Participant based upon achievement
of business criteria over a Performance Period.  The Committee may, in
its discretion, reduce the amount of a settlement otherwise to be made in
connection with such Performance Awards, but may not exercise discretion to
increase any such amount payable in respect of a Performance Award to a Covered
Employee which is designed to comply with Section 162(m) of the
Code.  The Committee shall specify the circumstances in which such
Performance Awards shall be paid or forfeited in the event of termination of
Employment by the Participant prior to the end of a Performance Period or
settlement of Performance Awards.

     

    (f)           Written
Determinations.  All determinations by the Committee as to the
establishment of performance goals, the amount of any Performance Award, and the
achievement of performance goals relating to Performance Awards shall be made in
writing in the case of any Award granted to a Participant.  The
Committee may not delegate any responsibility relating to Performance Awards
discussed in this Section 7.2(f).

     

    (g)           Status of Performance Awards under
Section 162(m) of the Code.  It is the intent of the Employer
and the Company that Performance Awards granted to Persons who are designated by
the Committee as likely to be Covered Employees within the meaning of Section
162(m) of the Code and regulations thereunder (including Treasury Regulations
Section 1.162-27 and successor regulations thereto) shall, if so designated by
the Committee, constitute “performance-based compensation” within the meaning of
Section 162(m) of the Code and regulations thereunder.  Accordingly,
the terms of this Section 7.2 shall be interpreted in a manner consistent with
Section 162(m) of the Code and regulations thereunder.  If any
provision of the Plan as in effect on the date of adoption or any agreements
relating to Performance Awards that are designated as intended to comply with
Section 162(m) of the Code does not comply or is inconsistent with the
requirements of Section 162(m) of the Code or regulations thereunder, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements.


    
      
         


      

      
        -14-

        
          

        

      

      
         


      

    

     

    ARTICLE
VIII

    OTHER
STOCK OR PERFORMANCE-BASED AWARDS

     

    8.1           Bonus Stock.  The
Committee is authorized to grant Common Stock as a bonus (“Bonus
Stock”).  Awards granted hereunder shall be subject to such
other terms as shall be determined by the Committee.

     

    8.2           Dividend
Equivalents.  The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive cash, Common
Stock, other Awards or other property equal in value to dividends paid with
respect to a specified number of shares of Common Stock or other periodic
payments.  Dividend Equivalents may be awarded on a free-standing
basis or in connection with another Award.  The Committee may provide
that Dividend Equivalents shall be paid or distributed when accrued or shall be
deemed to have been reinvested in additional Common Stock, Awards or other
investment vehicles, and subject to such restrictions on transferability and
risks of forfeiture, as the Committee may specify.

     

    8.3           Other Awards.  The Committee is hereby
authorized to grant to Employees, Non-Employee Directors and Service Providers
of the Company or its Affiliates, Other Stock or Performance-Based Awards, which
shall consist of a right which (a) is not an Award described in any other
provision of the Plan, and (b) is denominated or payable in, valued in whole or
in part by reference to, or otherwise based on or related to, shares of Common
Stock (including, without limitation, securities convertible into shares of
Common Stock) or cash as are deemed by the Committee to be consistent with the
purposes of the Plan.  Subject to the terms of the Plan, the Committee
shall determine the terms and conditions of any such Other Stock or
Performance-Based Award.

     

    ARTICLE
IX

    CERTAIN
PROVISIONS APPLICABLE TO ALL AWARDS

     

    9.1           General.  Awards may
be granted on the terms and conditions set forth herein.  In addition,
the Committee may impose on any Award or the exercise thereof, such additional
terms and conditions, not inconsistent with the provisions of the Plan, as the
Committee shall determine, including terms requiring forfeiture of Awards in the
event of termination of Employment by the Participant and terms permitting a
Participant to make elections relating to his Award.  Notwithstanding
the foregoing, the Committee may amend any Award without the consent of the
holder if the Committee deems it necessary to avoid adverse tax consequences to
the holder under the Non-Qualified Deferred Compensation Rules.  The
Committee shall retain full power and discretion to accelerate or waive, at any
time, any term or condition of an Award that is not mandatory under this Plan;
provided, however, that the Committee shall not have discretion to accelerate or
waive any term or condition of an Award (a) if such discretion would cause the
Award to have adverse tax consequences to the Participant under the
Non-Qualified Deferred Compensation Rules, or (b) if the Award is intended to
qualify as “performance-based compensation” for purposes of Section 162(m) of
the Code and such discretion would cause the Award not to so
qualify.


    
      
         


      

      
        -15-

        
          

        

      

      
         


      

    

     

    9.2           Stand-Alone, Additional, Tandem and
Substitute Awards.  Awards granted under the Plan may, in the
discretion of the Committee, be granted either alone, in addition to, in tandem
with, or in substitution or exchange for, any other Award or any award granted
under another plan of the Company, the Employer, any Affiliate, or any business
entity to be acquired by the Company, the Employer or an Affiliate, or any other
right of a Participant to receive payment from the Company, the Employer, or any
Affiliate.  Such additional, tandem and substitute or exchange Awards
may be granted at any time, subject to Section 9.7 below.  If an Award
is granted in substitution or exchange for another Award, the Committee shall
require the surrender of such other Award in consideration for the grant of the
new Award.  Notwithstanding anything in the Plan to the contrary,
Options granted in substitution or exchange for an option in a corporate
transaction shall be granted in accordance with the rules of Treasury
Regulations section 1.424-1.   In addition, Awards may be granted
in lieu of cash compensation, including, but not limited to, in lieu of cash
amounts payable under other plans of the Company, the Employer, or any
Affiliate.  Awards granted pursuant to the preceding sentence shall be
designed, awarded and settled in a manner that does not result in additional
taxes under the Non-Qualified Deferred Compensation Rules.

     

    9.3           Term of Awards.  The
term or Restricted Period of each Award that is an Option, Stock Appreciation
Right, Restricted Stock Unit Award or Restricted Stock shall be for such period
as may be determined by the Committee; provided that in no event shall the term
of any such Award exceed a period of ten (10) years (or such shorter terms as
may be required in respect of an Incentive Option).

     

    9.4           Form and Timing of Payment under
Awards; Deferrals.  Subject to the terms of the Plan and any
applicable Award agreement, payments to be made by the Company, the Employer or
an Affiliate upon the exercise of an Option or other Award or settlement of an
Award may be made in a single payment or transfer, in installments or on a
deferred basis; provided, that any such deferred payment will be set forth in
the agreement evidencing such Award and/or otherwise made in a manner that will
not result in additional taxes under the Non-Qualified Deferred Compensation
Rules.  The settlement of any Award may, subject to any limitations
set forth in the related Award agreement, be accelerated and cash may be paid in
lieu of shares in connection with such settlement, in the discretion of the
Committee or upon occurrence of one or more specified events; provided, however,
such discretion may not be exercised if the exercise of such discretion would
result in adverse tax consequences to the Participant under the Non-Qualified
Deferred Compensation Rules.  In the discretion of the Committee,
Awards granted pursuant to Articles IV, V and VII hereof may be payable in cash
or shares to the extent permitted by the terms of the applicable Award
agreement.  Installment or deferred payments may be required by the
Committee (subject to Section 1.4 hereof, including the consent provisions
thereof in the case of any deferral of an outstanding Award not provided for in
the original Award agreement) or permitted at the election of the Participant on
terms and conditions established by the Committee and in compliance with the
Non-Qualified Deferred Compensation Rules.  Payments may include,
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments or the grant or crediting of
Dividend Equivalents or other amounts in respect of installment or deferred
payments denominated in Common Stock.  Any deferral shall only be
allowed as is provided in a separate deferred compensation plan adopted by the
Company, which plan shall be compliant with the Non-Qualified Deferred
Compensation Rules.  The Plan shall not constitute an “employee
benefit plan” for purposes of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended.


    
      
         


      

      
        -16-

        
          

        

      

      
         


      

    

     

    9.5           Vested and Unvested
Awards.  After the satisfaction of all of the terms and
conditions set by the Committee with respect to an Award, including, if
applicable, the exercise of such Award and payment of any associated purchase
price, (a) a certificate, without, in the case of Restricted Stock, the legend
set forth in Section 6.4 hereof, for the number of shares that are vested,
earned, and/or no longer subject to restrictions, terms and conditions shall be
delivered to the Participant, in the case of Awards settled in Common Stock, and
(b) cash in an amount equal to the value of the number of shares of Common Stock
or appreciation vested and/or earned shall be paid to the Participant, in the
case of Awards settled in cash. Except as otherwise
provided in this Plan, the treatment of an Award upon a termination of
Employment or any other service relationship by and between a Participant and
the Employer, the Company or any Affiliate shall be specified in the agreement
controlling such Award.  Notwithstanding the foregoing, unless the
agreement evidencing an Option or an Award of Restricted Stock specifically
provides otherwise, all Options and Restricted Stock not otherwise vested shall
vest upon (i) termination of an Employee or Service Provider without Cause, (ii)
termination by an Employee or Service Provider with Good Reason, (iii) death or
Disability of the Participant, and (iv) in the case of Options only, a
Participant’s termination, removal or resignation for any reason within one (1)
year from the effective date of a Change in Control; provided, that the
foregoing provisions shall not apply with respect to any Option, Performance
Awards, Restricted Stock Units or Restricted Stock intended to constitute
“performance-based compensation” within the meaning of Section 162(m) of the
Code and the terms of any such Performance Awards shall be specified by the
Committee in accordance with Article VII. Upon termination, resignation or
removal of a Participant under circumstances that do not cause such Participant
to become fully vested, any shares subject to an Award that remain unvested
shall either be forfeited back to the Employer or the Company or, if appropriate
under the terms of the Award, shall continue to be subject to the restrictions,
terms and conditions set by the Committee with respect to such
Award.  Notwithstanding any other provisions of the Plan, upon or as
soon as reasonably practicable following the vesting of a Restricted Stock Unit
Award, Performance Award or Other Stock or Performance Based Award, the
distribution of all shares of Common Stock and/or cash due in settlement of such
Award shall be made in one payment no later than the fifteenth (15th) day of the
third (3rd) month following the date on which vesting occurs.  Should
the Participant die before receiving all amounts payable hereunder, any
remaining balance shall be paid to the Participant’s estate by the date
specified in the preceding sentence.

     

    9.6           Exemptions from Section 16(b)
Liability.  It is the intent of the Company that the grant of
any Awards to or other transaction by a Participant who is subject to Section 16
of the 1934 Act shall be exempt from Section 16(b) of the 1934 Act pursuant to
an applicable exemption (except for transactions acknowledged by the Participant
in writing to be non-exempt).  Accordingly, if any provision of this
Plan or any Award agreement does not comply with the requirements of Rule 16b-3
under the 1934 Act as then applicable to any such transaction, such provision
shall be construed or deemed amended to the extent necessary to conform to the
applicable requirements of Rule 16b-3 so that such Participant shall avoid
liability under Section 16(b).


    
      
         


      

      
        -17-

        
          

        

      

      
         


      

    

     

    9.7          Shareholder Approval Required for
Repricing.  Unless approval of the Company’s shareholders is
obtained, the terms of outstanding Awards may not be amended to reduce the
exercise price of outstanding Options or Stock Appreciation Rights or to cancel
outstanding Options or Stock Appreciation Rights in exchange for cash, other
Awards, or Options or Stock Appreciation Rights with an exercise price that is
less than the exercise price of the original Option or Stock Appreciation
Rights, except in connection with a corporate transaction involving the Company
(including, without limitation, any stock dividend, stock split, extraordinary
cash dividend, recapitalization, reorganization, merger, consolidation, or
exchange of
shares).        

     

    ARTICLE
X

    WITHHOLDING
FOR TAXES

     

    Any
issuance of Common Stock pursuant to the exercise of an Option or payment of any
other Award under the Plan shall not be made until appropriate arrangements,
satisfactory to the Employer and the Company, have been made for the payment of
any tax amounts (federal, state, local or other) that may be required to be
withheld or paid by the Employer or the Company with respect
thereto.  Such arrangements may, at the discretion of the Committee,
include allowing the Person to tender to the Employer or the Company shares of
Common Stock owned by the Person, or to request the Employer or the Company to
withhold shares of Common Stock being acquired pursuant to the Award, whether
through the exercise of an Option or as a distribution pursuant to the Award,
which have an aggregate FMV Per Share as of the date of such withholding that is
not greater than the sum of all tax amounts to be withheld with respect thereto,
together with payment of any remaining portion of such tax amounts in cash or by
check payable and acceptable to the Employer or the Company.

     

    Notwithstanding
the foregoing, if on the date of an event giving rise to a tax withholding
obligation on the part of the Employer or the Company the Person is an officer
or individual subject to Rule 16b-3 under the 1934 Act, then, to the extent
permitted by applicable law, such Person may direct that such tax withholding be
effectuated by the Employer or the Company withholding the necessary number of
shares of Common Stock (at the tax rate required by the Code) from such Award
payment or exercise.

     

    ARTICLE
XI

    ADJUSTMENTS;
CHANGE IN CONTROL

     

    11.1        Subdivision or Consolidation of
Shares.  The terms of an Award and the number of shares of
Stock authorized pursuant to Section 1.2 for issuance under the Plan shall be
subject to adjustment from time to time, in accordance with the following
provisions:

     

    (a)           If
at any time, or from time to time, the Company shall subdivide as a whole (by
reclassification, by a stock split, by the issuance of a distribution on Common
Stock payable in stock, or otherwise) the number of shares of Common Stock then
outstanding into a greater number of shares of Common Stock, then (i) the
maximum number of shares of Common Stock available for the Plan or in connection
with Awards as provided in Section 1.2 shall be increased proportionately, and
the kind of shares or other securities available for the Plan shall be
appropriately adjusted, (B) the number of shares of Common Stock (or other kind
of shares or securities) that may be acquired under any then outstanding Award
shall be increased proportionately, and (C) the price (including the exercise
price) for each share of Common Stock (or other kind of shares or securities)
subject to then outstanding Awards shall be reduced proportionately, without
changing the aggregate purchase price or value as to which outstanding Awards
remain exercisable or subject to restrictions.


    
      
         


      

      
        -18-

        
          

        

      

      
         


      

    

     

    (b)         If
at any time, or from time to time, the Company shall consolidate as a whole (by
reclassification, by reverse stock split, or otherwise) the number of shares of
Common Stock then outstanding into a lesser number of shares of Common Stock,
(i) the maximum number of shares of Common Stock for the Plan or available in
connection with Awards as provided in Section 1.2 shall be decreased
proportionately, and the kind of shares or other securities available for the
Plan shall be appropriately adjusted, (ii) the number of shares of Common Stock
(or other kind of shares or securities) that may be acquired under any then
outstanding Award shall be decreased proportionately, and (iii) the price
(including the exercise price) for each share of Common Stock (or other kind of
shares or securities) subject to then outstanding Awards shall be increased
proportionately, without changing the aggregate purchase price or value as to
which outstanding Awards remain exercisable or subject to
restrictions.

     

    (c)           Whenever
the number of shares of Common Stock subject to outstanding Awards and the price
for each share of Common Stock subject to outstanding Awards are required to be
adjusted as provided in this Section 11.1, the Committee shall promptly prepare
a notice setting forth, in reasonable detail, the event requiring adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the change in price and the number of shares of Common Stock,
other securities, cash, or property purchasable subject to each Award after
giving effect to the adjustments.  The Committee shall promptly
provide each affected Participant with such notice.

     

    (d)           Adjustments
under this Section 11.1 shall be made by the Committee, and its determination as
to what adjustments shall be made and the extent thereof shall be final,
binding, and conclusive.  No fractional interest shall be issued under
the Plan on account of any such adjustments.

     

    11.2        Corporate
Recapitalization.  If the Company recapitalizes, reclassifies
its capital stock, or otherwise changes its capital structure (a
“recapitalization”) without the occurrence of a Change in Control, the number
and class of shares of Common Stock covered by an Award theretofore granted
shall be adjusted so that such Award shall thereafter cover the number and class
of shares of stock and securities to which the holder would have been entitled
pursuant to the terms of the recapitalization if, immediately prior to the
recapitalization, the holder had been the holder of record of the number of
shares of Common Stock then covered by such Award, and the share limitations
provided in Section 1.2 shall be adjusted in a manner consistent with the
recapitalization.


    
      
         


      

      
        -19-

        
          

        

      

      
         


      

    

     

    11.3        Change in
Control.  Upon a Change in Control the Committee, acting in its
sole discretion without the consent or approval of any holder, shall affect one
or more of the following alternatives, which may vary among individual holders
and which may vary among Options or Stock Appreciation Rights (collectively,
“Grants”) held by any
individual holder: (a) accelerate the time at which Grants then outstanding may
be exercised so that such Grants may be exercised in full for a limited period
of time on or before a specified date (before or after such Change in Control)
fixed by the Committee, after which specified date all unexercised Grants and
all rights of holders thereunder shall terminate, (b) require the mandatory
surrender to the Company by selected holders of some or all of the outstanding
Grants held by such holders (irrespective of whether such Grants are then
exercisable under the provisions of this Plan) as of a date, before or after
such Change in Control, specified by the Committee, in which event the Committee
shall thereupon cancel such Grants and pay to each holder an amount of cash per
share equal to the excess, if any, of the value of the shares subject to such
Grants as of the Change in Control over the exercise price(s) under such Grants
for such shares (except that, to the extent the Exercise Price under any such
Grant is equal to or exceeds the value of such shares as of the Change in
Control, no amount shall be payable with respect to such Grant), or
(c) make such adjustments to Grants then outstanding as the Committee deems
appropriate to reflect such Change in Control; provided, however, that the
Committee may determine in its sole discretion that no adjustment is necessary
to Grants then outstanding; provided, further, however, that the right to make
such adjustments shall include, but not require or be limited to, the
modification of Grants such that the holder of the Grant shall be entitled to
purchase or receive (in lieu of the total number of shares of Stock as to which
an Option or Stock Appreciation Right is exercisable or other consideration that
the holder would otherwise be entitled to purchase or receive under the Grant),
the number of shares of stock, other securities, cash or property to which a
holder of such consideration would have been entitled to in connection with the
Change in Control (i) in the case of Options, at an aggregate exercise price
equal to the exercise price that would have been payable if the total number of
shares subject to the Option had been purchased upon the exercise of the Grant
immediately before the consummation of the Change in Control and (ii) in the
case of Stock Appreciation Rights, if the Stock Appreciation Rights had been
exercised immediately before the occurrence of the Change in
Control.

     

    11.4        Impact of Corporate Events on Awards
Generally.  In the event of changes in the outstanding Common
Stock by reason of a recapitalization, reorganization, merger, consolidation,
combination, exchange or other relevant change in capitalization occurring after
the date of the grant of any Award and not otherwise provided for by this
Article XI, any outstanding Awards and any Award agreements evidencing such
Awards shall be subject to adjustment by the Committee at its discretion, which
adjustment may, in the Committee’s discretion, be described in the Award
agreement and may include, but not be limited to, adjustments as to the number
and price of shares of Common Stock or other consideration subject to such
Awards, accelerated vesting (in full or in part) of such Awards, conversion of
such Awards into awards denominated in the securities or other interests of any
successor Person, or the cash settlement of such Awards in exchange for the
cancellation thereof.  In the event of any such change in the
outstanding Common Stock, the aggregate number of shares available under this
Plan may be appropriately adjusted by the Committee, whose determination shall
be conclusive.


    
      
         


      

      
        -20-

        
          

        

      

      
         


      

    

     

    ARTICLE
XII

    MISCELLANEOUS

     

    12.1        Transferability.  Except
as provided below, no Awards granted hereunder shall be transferable other than
by (a) will or by the laws of descent and distribution or (b) pursuant to a
domestic relations order entered or approved by a court of competent
jurisdiction upon delivery to the Company of a certified copy of such
order.  Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of, or to subject to execution, attachment or similar process,
any Award granted hereunder, or any right thereunder, contrary to the provisions
hereof, shall be void and ineffective, shall give no right to the purported
transferee, and shall, at the sole discretion of the Committee, result in
forfeiture of the Award with respect to the shares involved in such
attempt.  With respect to a specific Non-Qualified Option or Stock
Appreciation Right, the Participant (or his guardian), subject to the consent of
the Committee, may transfer, for estate planning purposes, all or part of such
Option to one or more immediate family members or related family trusts or
partnerships or similar entities.  Notwithstanding anything to the
contrary herein, an Incentive Option shall only be transferable in accordance
with Section 3.5 hereof.

     

    12.2        No Rights to
Awards.  No Participant or other Person shall have any claim to
be granted any Award, there is no obligation for uniformity of treatment of
Participants, or holders or beneficiaries of Awards and the terms and conditions
of Awards need not be the same with respect to each recipient.

     

    12.3        No Right to
Employment.  The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the Employer, the
Company or any Affiliate or as limiting any right which the Employer, the
Company or any Affiliate may have to terminate at any time, with or without
cause, the Employment of any Person to whom such Award has been
granted.  Further, the Employer, the Company or any Affiliate may at
any time dismiss a Participant from Employment, free from any liability or any
claim under the Plan, unless otherwise expressly provided in the Plan or in any
Award agreement.

     

    12.4        Governing Law.  The
validity, construction and effect of the Plan and any rules and regulations
relating to the Plan shall be determined in accordance with applicable federal
law and the laws of the State of Texas, without regard to any principles of
conflicts of law.

     

    12.5        Severability.  If
any provision of the Plan or any Award is or becomes or is deemed to be invalid,
illegal, or unenforceable in any jurisdiction or as to any Participant or Award,
or would disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to the
applicable laws, or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Plan or
the Award, such provision shall be stricken as to such jurisdiction, Participant
or Award and the remainder of the Plan and any such Award shall remain in full
force and effect.

     

    12.6        Other Laws.  The
Committee may refuse to issue or transfer any shares or other consideration
under an Award agreement if, acting in its sole discretion, it determines that
the issuance or transfer of such shares or such other consideration might
violate any applicable law or the rules of any exchange on which the Common
Stock is traded.


    
      
         


      

      
        -21-

        
          

        

      

      
         


      

    

     

    12.7        409A Compliance - No Guarantee of Tax
Consequences.  It is the intention of the Employer and the
Company that all Awards granted by the Committee be in compliance with the
Non-Qualified Deferred Compensation Rules in all respects and the Plan shall be
so construed; provided, however that the Participant shall be solely responsible
for and liable for any tax consequences (including but not limited to any
interest or penalties) as a result of participation in the Plan. Neither the
Board, nor the Employer, the Company nor the Committee makes any commitment or
guarantee that any federal, state or local tax treatment will apply or be
available to any Person participating or eligible to participate hereunder and
assumes no liability whatsoever for the tax consequences to the Participants.
Notwithstanding anything herein to the contrary, if any amounts payable
hereunder are reasonably determined by the Committee to be “nonqualified
deferred compensation” payable to a “specified employee” upon “separation from
service” (within the meaning of the Non-Qualified Deferred Compensation Rules)
then such amounts that would otherwise be payable upon separation from service
shall be held and not be paid by the Company upon separation  from
service, but shall be paid on the earlier of:  (1) the first day that
is six months following the Participant’s separation from service; or (2)
Participant’s date of death.  Such amounts that would otherwise be
payable in installments commencing on separation from service shall be
accumulated and made in one payment on the date that is the earlier of (1) or
(2) above and shall be paid in installments thereafter.

     

    12.8        Shareholder
Agreements.  The Committee may condition the grant, exercise or
payment of any Award upon such Person entering into a shareholders’ agreement in
such form as approved from time to time by the Board.

     

    12.9        Fractional
Shares.  No fractional shares of Common Stock shall be issued
or delivered pursuant to this Plan or any Award.  The Committee shall
determine whether cash, other Awards, or other property shall be issued or paid
in lieu of such fractional shares of whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.

     

    12.10      Conditions to Delivery of
Stock.  Nothing herein or in any Award granted hereunder or any
Award agreement shall require the Company to issue any shares of Common Stock
hereunder if such issuance would, in the judgment of the Committee, constitute a
violation of any state, local or federal law or of the rules or regulations of
any governmental regulatory body or applicable securities
exchange.  At the time of any exercise of an Option or Stock
Appreciation Right, or at the time of any grant of Restricted Stock, Restricted
Stock Unit Award, or other Award, the Company may, as a condition precedent to
the exercise of such Option or Stock Appreciation Right or settlement of any
Restricted Stock, Restricted Stock Unit Award or other Award, require from the
Participant (or in the event of his or her death, his or her legal
representatives, heirs, legatees, or distributes) such written representations,
if any, concerning the holder’s intentions with regard to the retention or
disposition of the shares of Common Stock being acquired pursuant to the Award
and such written covenants and agreements, if any, as to the manner of disposal
of such shares as, in the opinion of counsel to the Company, may be necessary to
ensure that any disposition by that holder (or in the event of the holder’s
death, his or her legal representatives, heirs, legatees, or distributees) will
not involve a violation of any applicable state or federal statute or
regulation, or any rule of any applicable securities exchange or securities
association, as then in effect.  No Option or Stock Appreciation Right
shall be exercisable and no settlement of any Restricted Stock or Restricted
Stock Unit Award shall occur with respect to a Participant unless and until the
holder thereof shall have paid cash or property to, or performed services for,
the Company or any of its Subsidiaries that the Committee believes is equal to
or greater in value than the par value of the Common Stock subject to such
Award.

     

    
      
         


      

      
        -22-